February 8, 2007

 

US corn, livestock industry stands divided over ethanol

 

 

Livestock producers in the US are starting to take positions at odds with their friends in the corn industry.

 

They have, in particular opposed tax and trade policies offered as incentives for corn-based ethanol production.

 

Only recently, National Cattlemen's Beef Association adopted a tentative resolution calling on Congress to let current tariffs on imported ethanol expire. They also said Congress should let lapse a tax credit to US companies that blend either foreign or domestic ethanol with other fuels.

 

Corn growers have expressed dismay at the positions taken by their top customers.

 

The US imposes a 54-cent per gallon tariff on imported ethanol and provides a 51-cent per gallon tax credit to ethanol blenders.

 

The National Pork Producers Council is expected to join the argument, said group's president, Joy Philippi.

 

Some farmers are having a tough time feeding corn to their pigs as corn producers have already contracted their production at current high prices to go to elevators or ethanol plants, he added.

 

Corn has jumped from less than US$2 a bushel last September to more than US$4 a bushel this week.

 

The problem might put some Congress members in an awkward position, since some of the biggest supporters of the corn industry in the Congress also often have livestock producers in their states or districts.

 

Incidentally, Sen Ben Nelson (D-Neb) said eliminating the tariff could flood the US market with cheaper foreign ethanol, hurting the fledgling US industry. He suggested allowing the tariff to end on schedule in Oct 2009 as a worth consideration.

 

Sen Chuck Grassley (R-Iowa), a vocal supporter of the ethanol industry and ranking member of the Senate Finance Committee felt otherwise.

 

A switch to cellulosic ethanol, derived from switchgrass and wood chips could help reduce the cost of corn and offer relief to livestock producers, Grassley said.

 

Meanwhile, the National Corn Growers Association predicts corn prices would fall soon. Key reasons include a larger corn supply thanks to increased planting and larger yields.

 

However, livestock groups support the broader goal of reducing US dependence on foreign oil through the development of renewable energy.